With a big, bold deal for hot messaging service WhatsApp, Facebook is demonstrating it wants youth, a wider footprint in more markets and new kinds of services to stay fresh.
Analysts say the staggering price tag of up to $19 billion in stock and cash highlights Facebook’s drive to be more mobile, global and to remain innovative.
“It shows the continued determination of Facebook to be the ‘next’ Facebook,” says Benedict Evans, a partner in the venture capital firm Andreessen Horowitz.
Evans said Facebook is responding in part to the explosion of mobile social apps and wants to assert itself as the dominant platform.
“Any smartphone app is just two taps away,” Evans says in a blog post. “So It’s quite possible mobile social will have lots of services indefinitely. This creates opportunities, but also a pretty basic challenge to Facebook.”
Still, the news left many observers stunned that Facebook would pay such a steep price at a time when the world’s biggest social network seemed to be riding high.
“The size of this deal is really massive and it will get people talking about a bubble,” Greg Sterling at Opus Research told.
Sterling said the deal is a risk for Facebook because “in social media you have a flavor of the month, and next year we might have another app with extremely rapid growth.”
“I think (the high price tag) comes from the frustration of not being able to buy (the messaging service) Snapchat, and then there is the youth factor,” Sterling added.